Tuesday, March 19, 2019
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  • Dismissal Law: a mess.

    The employment laws around dismissal are difficult for many employers to navigate and can have some serious consequences. If you have 1 or 100 staff the same rules apply. Read more to find out what yo...
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Dismissal Law: a mess.

For over 20 years employers have been subjected to unfair and complicated employment laws that tell employees how to extract money from the employer, but explains nothing to employers about what they are supposed to do.

The only guide for employers in the current employment law (Employment Relations Act 2000) is a tiny sub-clause buried in sub-section 103a, which (unhelpfully) says:

"...how the employer acted, were what a fair and reasonable employer could have done in all the circumstances."

What does that mean? The courts say this means employers have to follow about 100 - 200 different rules, but the trouble is no one is telling our small employers.

Over 90 percent of our employers employ less that 10 people and they do not have the resources to read and understand all the employment court decisions.

They are busy trying to make a living. 

Employment law is as complicated and varied as the road code, but anybody can dabble in employment matters without a liecence.

The law needed to be changed 20 years ago. We are surprised that the employers' representative, EMA, recently discovered that this is a problem and that employers are paying problem employees off rather than defending themselves.

Most employers today have had some experience relating to this employment law and live in fear of having a personal grievance taken against them.

What goes through people's minds when you mention "employment law"?

Employees think:
"If my boss steps out of line, I'll have him."

Employers think:
"The law is stacked against me. It is too complicated and difficult."

"If I discipline or fire my employees, I will end up paying them for a personal grievance."

"If I try to improve my employees' performance they will take an action against me for bullying and imposing stress."

Many employers live in fear of having a personal grievance taken against them. And because 95 percent of New Zealand businesses employ less than five people, most can't afford constant legal advice and, therefore, do not comply with employment law.

Small employers "wing it" by complying only when it has direct impact; for example, the well-publicised issue of four weeks' holiday.

What does the law actually say?

The major piece of legislation relating to personal grievances is the Employment Relations Act 2000 and its amendments. It has 245 double-sided pages and is primarily directed at big business, which accounts for only five percent of employers.

The law seems to assume that most workplaces need a collective agreement and union involvement. It misses the point that personal grievance is by far the biggest cost to our society and workplace goodwill.

While there is a section in the Act on personal grievances, it focuses on what will happen to employers who get it wrong and matters covered in the Human Rights Act. There is nothing that tells an employer what's right or wrong when it comes to dismissals. It only discusses how workers can take an action against their employer and what penalties will apply.

It's no wonder approximately 80 percent of employers get dismissals or disciplinary measures wrong because they fail to follow the right procedures.

But guess what: our politicians forgot to mention anything about procedures in the whole 245 pages of the Employment Relations Act!

It is the most significant employment issue. It costs the tax payer and employers millions of dollars every year and is dramatically affecting our workplace culture; yet there is nothing in the Act that explains to employers how to negotiate their way through this minefield.

In fact, there is an only a tiny sub-clause buried in sub-section 103a which (unhelpfully) says:

"...how the employer acted, were what a fair and reasonable employer could have done in all the circumstances."

At a recent seminar, a judge, a well-known employment lawyer and an employment-law lecturer debated the court's recent interpretation of this section. I raised my hand and said, "There are over 300 employment advisors here. Please tell us who this ‘fair and reasonable employer' is, so we know what it is we are supposed to do."

They all agreed that the clause gave no answers. Why does our employment law so badly miss the mark?

Our government is largely made up of ex-union delegates, teachers and lawyers. Fewer than one percent have ever owned or run a business. Most politicians' employment experience has been in government institutions or somewhere on the back of taxpayers.

The advisers and people they consult, regarding employment law, are predominantly unions, which generally only operate with large employers. Even employers' advocates like Business NZ or EMA focus primarily on big businesses like Telecom and Carter Holt.

All these government politicians and advisers miss the point: 95 percent of employers are not big businesses and their biggest concern is avoiding personal grievances.


Letting a new employer engage staff without guidance is like letting a new driver on the road without a licence. New drivers have to learn the road code. The government doesn't even provide employers with a code. Perhaps business people need to get a licence before they can employ people.

If you drive over the speed limit you can cop an instant fine. The same could be done with employment matters. For example, a fine equal to two months' of employee's earnings for failing to ask an employee for an explanation before dismissing them.

What we need is an employment code with clear rules and set penalties. But let's not leave it up to the politicians. They can only be relied on to get it monumentally wrong!

Max Whitehead is the principal of the Whitehead Group, an independent Auckland human resource and employment consultancy and offers free initial advice to all employers.



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